The measure would allow those purchasing a car or recreational vehicle to reduce their sales tax to the “difference” between the purchase price and the trade-in value of a vehicle. The trade in value would be capped at $2,000.

“Middle-class families will see tax relief, and businesses will see increased sales,” said Sen. Phil Pavlov, R-St. Clair Township. “I commend Representative LaFontaine for spearheading the effort on these common sense changes.”

Michigan law currently requires vehicle owners who trade in their vehicle toward the purchase of a newer one to pay sales tax on the total price of the new car, rather than the actual price paid after the value of their used vehicle is subtracted. Many have argued this is an unfair double taxation burden to consumers, and also negatively impacts businesses that lose sales to neighboring states that only charge sales tax on the difference.

A companion bill, sponsored by Sen. Dave Robertson, R-Grand Blanc, and co-sponsored by Pavlov, would require the same sales tax treatment for watercraft. Senate Bill 89 provides for an automatic $500 increase in the cap of the trade-in value beginning Jan. 1, 2015, and each Jan. 1 thereafter, up to $14,000, at which time the cap is eliminated.

SB 89 currently awaits final action in the Senate, while HB 4234 heads to Gov. Rick Snyder for his signature.